I read that as "Because FundersClub has validated the business model," not because of the SEC approval.

I have no idea if FundersClub is wildly profitable or not, but I thought that "validating a business model" meant the model was profitable, not just legal.

In common terms, "validating the business model" can be as simple as other people going after the same idea as you. While that doesn't necessarily make it a profitable idea, it does make it feel more like an obvious idea whose time has come.

Even in the case of copycats, if the idea has legs enough to spawn copycats, that may also speak to its viability. Groupon is a great example of this. Despite Groupon's own troubles, it has spawned a number of copycats that appear to be doing quite well.

In short, validation doesn't necessarily mean profits. It could mean high signup rates with the later potential to monetize (ala Twitter), or it could mean copycats, or it could mean (of course) profits.

I'm not trying to have a back-and-forth but I think you are confusing business ideas and business models. Many potentially great businesses (high sign up rates, etc.) struggle to find a valid business model.

For what it's worth, I don't actually disagree. I was speaking hypothetically. The point was only that many people consider competition as a validation of a business model, and don't necessarily wait for profit (the only real validation) to act as that actual validation.

In a lot of cases, this is valid. If you're a Venture Capitalist, for example, if you're waiting for a business to become profitable on its own, then you're not getting terms that are nearly as good as if you'd acted earlier. So even amongst those in the know, "validation" can be seen as something far less than absolute dollar terms, and may still be a valid rung on the ladder of decision making.